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AMD reveals $131m loss and plans to lay off 15 percent of workforce

Bad news continues
Fri Oct 19 2012, 13:01
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CHIP DESIGNER AMD reported a third quarter loss of $131m and confirmed it will lay off 15 percent of its workforce to cut costs.

AMD's miserable 2012 continued as it announced a steep drop in revenues to $1.27bn for the third quarter leading to a $131m loss. The firm also said it will let 15 percent of its workforce go in a bid to cut costs.

With AMD seeing revenue dropping by almost 25 percent from the same quarter in 2011 and close to a $270m swing from a $138m profit in 2011 to a $131m loss last quarter the firm talked up its cost cutting measures. The firm's stock price has been hammered in recent weeks, leaving the company with a market capitalisation of less than $2bn, significantly less than AMD paid for ATI back in 2006.

AMD said its gross margin was down due to writing off $100m in Llano parts. While AMD spent most of last year talking up Llano sales, the chip hasn't been able to get into enough high profile products, with the firm now saying there was "weaker than expected demand" that led to lower average selling prices.

AMD CEO Rory Read said, "It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model. Our restructuring efforts are designed to simplify our product development cycles, reduce our breakeven point and enable us to fund differentiated product roadmaps and strategic breakaway opportunities."

Read also announced a 15 percent cut in the firm's workforce, which had been widely expected and was leaked last week. Read said the redundancies are part of his plan to cut operating expenses and will occur in the next three months, adding, "Reducing our workforce is a difficult, but necessary, step to take advantage of the eventual market recovery and capitalize on growth opportunities for our products outside of the traditional PC market."

Read did not say which departments will be affected, but given the significant numbers it is likely that many departments and sites will see headcount reductions.

AMD's losses might not be as bad as its 2012 first quarter, however the company can't afford to keep losing money and, more importantly, see its gross margins wither away. AMD desperately needs its Vishera desktop processor, which is set to launch next week, to provide a compelling reason for consumers and system builders to once again consider AMD parts after Bulldozer's disappointing showing. µ


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